BSP Governor Rafael B. Buenaventura reported today that the balance of payments (BOP) for the first quarter of the year yielded a surplus of $2.157 billion, a turnaround from the $512 million deficit in the same period last year. Behind this favorable development was the stronger performance of both the current and the capital and financial accounts.
The current account surplus of $2.323 billion was 38.7 percent higher than the surplus registered in the same period a year ago. This was due mainly to the significant expansion in net income receipts and the sustained surplus in the trade-in-goods account.
Exports of goods fell by 5.3 percent to $7.902 billion during the first three months of 2002. However, the rate of decline in exports showed bottoming out as the year-on-year contraction had decelerated to single-digit rate since January 2002 compared to the double-digit rate of contraction during the last nine months of 2001. Behind this positive development was the marked slowdown in the decline of electronics exports, whose year-on-year contraction was only 2.3 percent in March from a high of almost 39 percent in May 2001, as well as the continued strength in the exports of machinery and transport equipment. These tempered the 18.9 percent decline in exports of garments, which suffered from stiff competition particularly in the US market, the major destination for the country’s exported garments. Electronics, garments, machinery and transport equipment remained as the country’s leading exports during the review period.
Imports for the first quarter of the year fell by 2.8 percent to $6.789 billion from the year-ago level. Nonetheless, this rate of contraction was lower compared to the 8.2 percent decline posted in the same period a year earlier. Imports started to rebound in February 2002 after seven consecutive months of declines following higher imports of capital goods and raw materials and intermediate goods, particularly materials and accessories for the manufacture of electrical equipment.
The income account in January-March 2002 posted a surplus of $1.331 billion, almost twice the surplus achieved last year on the strength of higher remittances from overseas Filipino workers (OFWs). Receipts from OFWs grew by 38.0 percent from last year’s level to $1.964 billion, reflecting the increased deployment of Filipino workers abroad. The intensive monitoring of OFW remittances particularly those coursed through foreign exchange corporations also contributed to the higher level of inflows reported during the quarter.
The deficit in trade-in-services was reduced to $224 million during the review period from the $355 million in 2001 due largely to lower net outflows for transportation services coupled with higher net inflow for travel. The former was a result of reduced payments for freight following the contraction in goods imports. Meanwhile, the travel account yielded a surplus of $257 million, 26 percent higher than last year’s level following the larger decline in travel payments relative to the drop in travel receipts. It is worth mentioning that although travel receipts were lower compared to last year’s level, this major item of receipts has been on the uptrend since September 2001.
Portfolio investments for the first quarter of the year reversed to a net inflow of $1.511 billion from a net outflow of $554 million last year. Underpinning this was the positive response by investors to the bond issues of the government in the international market, which indicated renewed investor confidence in the Philippines. Non-residents’ investments in equity securities in the country, which rose to $122 million from $100 million during the comparable period last year, also contributed to the favorable performance in portfolio investments.
Meanwhile, net inflows of direct investment for the first three months of 2002 more than doubled to $1.224 billion. This was attributed largely to the increase in non-residents’ investments in equity capital and higher intercompany loans by parent companies to their subsidiaries. Direct investment inflows were directed to manufacturing companies, financial institutions, and services industries.
The net outflow in the other investment account rose by 37.5 percent to $2.374 billion in the first three months of 2002 from $1.726 billion in the same period last year. This developed following higher net deposits abroad by resident banks to fund their clients’ import requirements and to diversify their portfolio. Payments arising from maturing non-residents’ deposit placements to local banks also contributed to the net outflow in the other investments account.
As of end-March 2002, the BSP’s GIR reached $17.4 billion, up by 10.9 percent from the level in end-December 2001. At this level, reserves were adequate to cover 5.7 months’ worth of imports of goods and payment of services and income. Using other reserve coverage measures, the level of reserves was 3.1 times the level of the country’s short-term external debt based on original maturity or alternatively 1.5 times the amount of short-term external debt based on residual maturity.